Instant personal loans could be the perfect solution for consolidating your debt, but only if you consider all the implications.
Debt consolidation, if done correctly and under the right circumstances, can offer many financial benefits.
People generally take out instant personal loans so they can pay back other smaller loans they’re making monthly payments on. The main benefit of consolidating these smaller debts into one larger debt would be to get a lower interest rate overall. A debt consolidation loan is usually taken out to pay off a bunch of short-term high-interest loans, like credit cards and charge cards for retail stores.
It is quite easy to get a personal loan online with a lower interest rate and a longer term. When you consolidate your debts in this manner you lower your monthly payments, which frees up more cash for other living expenses.
You are probably wondering if your financial situation could be improved if you applied online for instant personal loans to consolidate your debt. Here are some examples of circumstances in which it might make sense to do this.
If you want relief from the monthly financial burden of the following debts:
The repayments every single month on the above debts come to R10 500, which includes a relatively high rate of interest.
By going online to take out an instant personal loan, you could get another home mortgage advance to obtain the funds to pay off or at least pay down your other smaller loans. Once you consolidate these loans, your home mortgage would be R790 000, leaving you with this one monthly repayment.
On the surface it seems like a great idea to consolidate debt with a personal loan, but as with most things in life, it does pose risks. Yes, it would help your monthly cash flow, but in exchange it would take you many more years to pay off all your debts. Instead of paying those smaller debts off in three to five years, it might take you 20. When you total it all up, you would be paying a lot more in interest. The truth is, you could be continuing to pay on your car loan well after you’ve already traded it in or sold it.
This situation is something you would definitely want to avoid. To do that you could repay as much possible every month when making your mortgage payment. Our advice would be to get an instant personal loan to consolidate your debt, then overpay on your bond every month so that you can hopefully pay your home mortgage off in less than 10 years instead of 20. This would save you an enormous amount of money in interest.
How to Handle Short-Term High-Interest Loans
Ideally, it is better to repay short-term high-interest credit card debt as soon as possible. But that does not mean you should habitually take out instant personal loans to consolidate those debts. However, if you are at risk of defaulting on a loan, this is one possible option.
Going online to obtain a personal loan to consolidate your debts makes sense when you are on the verge of having your possessions repossessed or of being served with a judgment.